The Jackson, Tenn., native was among thousands of students who unexpectedly either had to stay at home, transfer to a less expensive school or find new money when the U.S. Department of Education quietly changed how it evaluated the credit of parents applying for a federal PLUS loan.
The greater scrutiny affected families and schools everywhere, but historically black colleges were hit particularly hard because so many of their students come from low-income families dependent on PLUS loans. In recent years, as many as a third of all black college graduates had used PLUS loans, a proportion twice as high as the rate for all schools, according to one estimate.
“All I’ve known is school, so this is weird not being in school all the time,” said Partlow, who would’ve been a junior this year at historically black Spelman in Atlanta. Partlow attended Spelman last spring with the help of a PLUS loan, but her application for the fall was rejected.
The Education Department said the changes were made as part of an effort to more closely align government lending programs with industry standards and decrease default rates.
Before the changes, the loan program looked at whether an applicant had an adverse credit history for an account in the past 90 days. Now the program looks for delinquent accounts during the last five years. The examination includes foreclosures, bankruptcies, wage garnishments, repossessions and tax liens, in addition to past due payments on bills such as utilities.
While many colleges worried about the denials, others said the changes prevented lower-income families from being saddled with debt they can’t afford.
“There are parents getting these loans that really shouldn’t be getting these loans. They just don’t have the money,” said Rachel Fishman, an education policy analyst for the nonpartisan New America Foundation think tank in Washington. The policy change was made in October 2011, but most students and schools were unaware of it until this past summer when their loans were unexpectedly rejected.
PLUS loans are popular because they don’t have a limit and can cover tuition, fees, books as well as room and board and other expenses set by a school.